PLDT bond issue is ‘credit positive’

Moody’s Investors Service said that the proposed P15-billion bond issue of the Philippine Long Distance Telephone Co. (PLDT) is credit positive.

PLDT intends to use the proceeds of the bonds to fund its capital expenditure and refinance a portion of its existing debt.

In a statement, Yoshio Takahashi, a Moody’s assistant vice president, said that, “While the debt offering could modestly increase total debt outstanding in the near term, it will help PLDT to term out its debt maturity profile and reduce foreign exchange rate risk.”

PLDT announced recently that it obtained approval from the Securities and Exchange Commission (SEC) to sell bonds with a base offer size of P10 billion, and an option for oversubscription of up to P5 billion.

It plans to issue 5.225-percent seven-year bonds that will due on 2021, and 5.2813-percent 10-year bonds and will be due on 2024.

At end-September 2013, about P17.7 billion, or 16 percent of PLDT’s total outstanding debt of P110 billion were due in the 15-month period ending December 2014. PLDT plans to use a portion of cash proceeds to refinance approximately 40 percent of its debt maturing in 2014 or about P5.6 billion.

With the new bonds, in Moody’s estimation, PLDT’s total debt maturing beyond 2018 will increase to over 40 percent from 30 percent at end-September last year. The refinancing will also help reduce the company’s foreign exchange rate risk, as majority of PLDT’s debt to be refinanced amounted to $105 million or P4.6 billion.

At end-September 2013, PLDT had dollar-denominated debts amounting to $1.377 trillion about P60 billion, which accounted for 55 percent of its total debt. Of the total, $927 million, or 39 percent of total debt were unhedged.

Moody’s considers reducing US dollar exposure as becoming more important, given the 8.7-percent depreciation of the peso versus the dollar in 2013.

Moody’s noted that PLDT posted $600 million in dollar-denominated revenues in the first nine month to September 2013. In addition, it had $169 million in dollar-denominated cash at end-September 2013.